Beware of Scam “Charitable LLCs”

The IRS is warning you to avoid promoters pushing a tax scheme using ownership interests in closely held businesses, which may be marketed as “charitable LLCs.” The promoter promises you a charitable contribution for forming an LLC, putting cash or property into the entity, and then donating a majority percentage of nonvoting, nonmanaging membership units to a charity, with a right to buy back this interest. The IRS labeled this an abusive transaction and reminds you that a deduction cannot be claimed a charitable contribution of less than your entire interest in property, and retaining rights to control the donated interests or buy back assets disqualifies the transaction as a deductible charitable contribution. #IdeaoftheDay

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